The headline should be reversed. It's Japan's Elderly who have become 7-Elevens' Lifeline.
Competition in the industry is fierce. Chains are consolidating. Family Mart alone has bought AM/PM (2009), Cocostore (2015), and Circle-K (2016) over the last few years. Margins are becoming thin as traditional high margin items like the bento boxes and hot food items are under assault by Super market chains that (1) have begun offering these same items at bargain prices and (2) are staying open until later to cater to the long hours of corporate workers.
Convenience stores traditionally catered to the youth and "salary men", but with shifting demographics and shifting consumption patters of these traditional target segments, they have been eyeing the elderly as a "growth segment" since at least 2009 when I lived there as a "salary man".
Your comment seems to imply that 7-Eleven is in trouble, but it's still the biggest of the convenience store chains, which is why the other chains are consolidating. I don't know about their profits, but revenue is growing year after year, and their number of stores is also increasing. If anything, it would be the other chains who might need to rely on the elderly more.
Astute observation -- I wasn't aware of their competitive advantage, though I did understand them to be doing well (other than having the best jingle in their commercials).
But there are two passages that stand out to me from the mainichi article
7-11 has done excellently against its competitors, stealing their customers away. But the industry as a whole has matured and has become a zero sum game. I would still contend that targeting the elderly as a growth segment that traditionally has not frequented convenience stores is an industry-wide growth bet that includes 7-11 as well.
I don't doubt that targeting the elderly as a growth segment would be a good idea for the entire industry. It's just that your original comment suggested 7-Eleven in particular was in danger, which didn't jive with my personal experience, so I looked up the numbers.
7-Eleven Japan also owns 7-Eleven US, and I think elsewhere. When 7-Eleven in North America was in trouble in the early 1990's, the Japanese franchise bought and bailed them out.
Huh, I wouldn't have guessed the bento boxes were particularly high margin. (I am not expressing doubt, just surprise. I'd have assumed they get their best margins on drinks and, depending on how you calculate things, financial services.)
By visual inspection, though, I think you're likely right with regards to the changing customer mix. Another not-historically-core customer: working women, who might grab a few essentials (and possibly, a dinner) rather than making a full trip to the grocery store.
One caveat about the Bento and other hot food items that I should explain. These are high margin on their own (particularly Oden, believe it or not, which have a gross margin of 50% [1]), and were a boon to the industry in its expansion years.
But with increased competition from a higher density of convenience stores, as well as other competing sectors (super markets, fast food, etc.), the inventory turnover rate has dropped from its peak years, and since these food items are perishable, it's now a point of risk for convenience stores who are expected to carry the items but have uncertainty over how they'll be able to clear inventory.
(by the way you're also spot on about the soft drinks. Also, copies have 70% margin)
If you are ever wondering "Hmm, this is in Japanese; I wonder if it is appropriate for HN" about links like that please err on the side of posting more of them. That is one of the most interesting things I've read about business in the last several months.
(Summary: a deep dive by a convenience store operator on the microeconomics of offering a particular seasonal dish in Japan, in particular vis the logistical difficulties, cost structure of the offering, and knock-on effect it has on the conveniences store's other business.)
All of the combini chains make somewhere around 30% of their gross profits from tobacco. So that is their most profitable single category.
SevenEleven is the largest chain, not only by store count - after the CircleK / Sunkus integration by FamiilyMart that will be almost at parity - but more importantly, SevenEleven's per store sales are 20-30% higher: a huge advantage to them.
For Americans who are confused about how 7-11 might be a nice place to go and not just a place for soda, cigarettes and lottery tickets, in Japan 7-11 carries higher quality items than what you might find in the U.S. The same is also true of Denny's (an increasingly seedy establishment in the U.S.), which serves high quality seasonal dishes in Japan.
This varies quite a bit depending on where you are. We seem to have three different versions of Denny's here in the Dallas/Ft Worth area alone. One style thet looks like a classic diner, another that's your typical old Denny's architecture, and a few more that are brand new construction. I'm not sure if they're just testing out a concept, but it's been interesting to see that they're still branching out.
The convenient stores in Taiwan are also super convenient by not only offering free WiFi, ticket buying, or bill payying,, but also like a mini-Staples + mini-Shoprite + mini-Starbucks where you could just print PDF or photos, picking up your online orderings, buying groceries, and even artisan latte. And their density in Taiwan is much higher than Starbucks you could find in Manhattan.
I was so happily surprised when I saw customers of Taipei's 7-11s picking up their online orderings at 11pm(Or whatever our) at the shop. I always thought such a thing should exist in Europe, where for some reason you are never home when the delivery arrives.
Well, Germany has so-called "Paketshops". Unfortunately, apart from gas stations and the like, those usually close at 18:00.
Alternatively, there are always neighbours who can take the packet for you.
When I was growing up as a baby boomer 7-11 was one of the hangouts like the malt shop was for kids of our parents generation.
But for the next generations it changed. Young people gathering was seen as a problem to be corrected. Local 7-11's started playing classical music specifically to get rid of kids loitering.
I never thought of it before but what they've done is make certain that the baby boomers will be the last generation to support 7-11 and after that they will all die out. Don't know if it's played out that way in Japan or not.
Even though it's now Japanese owned, I've found the density of 7-11 to be so much higher in Taiwan and Thailand. Overall its a convenient place to go to whose prices are relatively set, products are safe, and money service legitimate. Given the franchise model you will find one on every block right now.
As a traveller in Asia its actually really just been a "safe" ATM spot for me.
In the US Midwest its Caseys, a chain of folksy convenience stores. Every small town has one or two (one at each end of town). A couple tables inside allow for socializing. Every morning the old folks gather and talk over coffee. They're completely familiar to the behind-the-counter workers; clearly welcome to stay and drink coffee and chat. Reminds me of the old town diner or truck stop of my youth.
Waffle Houses are somewhat analogous in the US South. They're everywhere (there are 4 within a 15 minute drive of my house), but many people have a favorite one. We'll occasionally pop into one of the nearby ones after church on Sunday. Usually the same regulars in there and the staff know them by name and order. My daughter loves it because she loves watching them cook.
Fun fact, FEMA has a "Waffle House index" [0] to determine how damaging a weather event such as a hurricane or tornado outbreak has been based on how many Waffle Houses are still open and what they're serving.
I'm impressed at how much more gracefully 7-11 handled it than McDonalds initially did in Queens, NY where I grew up [1]. It also helps that a government agency was observant and proactive enough to partner with a private company to build on existing customer behavior, vs trying to start separate initiatives.
Yes. I currently live in a condo in Bangkok that has an always-open 7-11 in the building. Some of the interesting offerings:
- I can pay pretty much any bill over the counter. (electricity, mobile/internet, ecommerce purchases from Lazada, flights booked with AirAsia, etc)
- There's a wide selection of packaged & refrigerated food that they can warm up for you; microwave meals, various types of toasties, congee/noodles (these are self serve, but they provide the hot water), etc.
- They sell alcohol in the fridges alongside soft drinks. I know that's normal in other parts of the world too, but coming from Australia, is unimaginable there.
- I think there is also a catalog of stuff I can order and pay for in store and pick up later. Not 100% sure because I haven't tried that yet.
Is paying bills such a complex situation in Bangkok wuthout 7-11's?
In The Netherlands bills can be automatically deducted from your bank balance if you choose so, or we can easily pay them online regardless of bank through a joint system called iDeal.
Having lived in an Urban Renaissance complex that hosted a convenience store (not a 7-Eleven, but a local co-operative), I can certainly understand how seniors would stay social there. You'd always run into neighbours while grabbing groceries and end up chatting. The place worked as a good social hub.
When i was in Japan a year ago i especially liked the convenience stores for their coffee. Family Mart in particular has excellent coffee that's really cheap compared to other places.
Pro tip: When you travel Japan and want to save money, don't buy stuff at 7-11s (except its 100-yen coffee which is a good deal, IMO).
I'm always fascinated by the logistics side of a convenience store. They micromanage everything to its maximum efficiency/profitability. In the case of 7-11, there are almost 20,000 stores throughout Japan, and each store gets delivery three times a day. I read they predict demands each day based on its weather/holidays, and change its supplies accordingly. They also keep curating their product lines (typically, about 3000) including perishables. The whole system is amazingly massive and complex. They cram stuff in such a small space without violating the fire regulations and whatnot, yet they know how to display them in a visually appearing and approachable way. It truly feels like an art. cf. http://www.sej.co.jp/company/tenpo.html
On the other hand, they have a greedy corporate side, of course. I read they always have backup staffs so even when a store manager dies (each store is a franchise business run by a family) they can keep the store running.
In Thailand at least, the prices are generally the same as supermarkets. I'm guessing it's the same in Japan.
In Australia there is definitely a massive gap between convenience store pricing and supermarket pricing, though. Probably to the point of paying 2x or 3x on some items.
I noticed the same comparing Thai 7-Elevens to those in the US. Nearly the same prices in Thai 7-Elevens and Thai supermarkets, whereas in the US there was a significant price difference (from what I recall, it's been a while since I've been back).
Competition in the industry is fierce. Chains are consolidating. Family Mart alone has bought AM/PM (2009), Cocostore (2015), and Circle-K (2016) over the last few years. Margins are becoming thin as traditional high margin items like the bento boxes and hot food items are under assault by Super market chains that (1) have begun offering these same items at bargain prices and (2) are staying open until later to cater to the long hours of corporate workers.
Convenience stores traditionally catered to the youth and "salary men", but with shifting demographics and shifting consumption patters of these traditional target segments, they have been eyeing the elderly as a "growth segment" since at least 2009 when I lived there as a "salary man".